The powers as envisaged do not involve the complete block grant. The block grant—the total money available to Wales—will not change on day one. The only issue of contention is the fiscal framework; I have been making that point. The devolution of the fiscal power itself is not an issue in terms of making Wales poorer on day one.
There is also a technical reason why we should be fully devolving income tax powers. It is far more difficult to create a fair fiscal framework to accompany the partial devolution of income tax as opposed to full devolution. The result of this would be to enable future Welsh Governments to continue to avoid responsibility for their mistakes. In the interests of transparency, accountability and—critically—incentivisation, I hope even at this late stage that the UK Government will accept my new clause 3.
A key element of ensuring that the devolution of income tax is devolved successfully is the empowerment of the National Assembly to set income tax thresholds. New clause 2 aims to achieve this objective and I will press it to a vote on the second day of Committee, with the Chair’s permission. If we have time, I would also like to press new clause 3. We will discuss these new clauses on Monday.
New clause 2 is of vital importance as we embark on the journey of devolving income tax powers. The setting of thresholds is a key component of being able to use those powers based on domestic considerations. The Welsh economy in comparison to other parts of the UK is, regrettably, currently a lower-wage economy, a concern raised by Labour colleagues. New clause 2 would enable the National Assembly ultimately to determine the number of income tax thresholds and the levels at which they are set, including, critically, the basic rate. That freedom
would enable the Finance Minister of the Welsh Government, whoever he or she may be, to set innovative income tax structures aimed at maximising revenues for the Welsh Exchequer to invest in Welsh public services, but also to encourage wealth creation and encourage investment.
It has been a consistent policy of the current Chancellor to increase personal allowances—in other words to increase the rate at which people begin paying income tax. Brexit may lead to a radical reversal of this policy in the coming months and years by the next Chancellor as revenues reduce. However, the key point is that as long as the ability to set personal allowances is reserved to London and Wales has a low-wage economy, decisions by Chancellors here could have significant impacts on the revenue available to invest in Welsh public services.
It really is all or nothing when it comes to the devolution of income tax and, as someone who supports making the Welsh Government fiscally responsible, I very much hope that the UK Government decide to support the former. Diolch yn fawr iawn.